Ares Commercial makes progress in loan settlement of Investing.com

Ares Commercial Real Estate Corporation (ACRE) made significant progress in addressing nonperforming loans in the first quarter of 2024, according to its latest earnings warning. The company said it reduced the principal balance of non-performing loans by $133 million and reduced exposure to the commercial office sector by $70 million. Despite this positive development, Ares Commercial reported a GAAP net loss of $12.3 million and a dividend loss of $33.5 million for the quarter. However, the company remains focused on resolving non-performing loans and is cautiously optimistic about commercial real estate markets. A regular cash dividend of $0.25 per common stock for the second quarter of 2024 has been declared.

Most important lessons

• Ares Commercial Real Estate Corporation resolved 4 outstanding loans, improving distributable profits.
• Reduced the principal of loans without accrued interest by $133 million.
• Reduced exposure to the commercial office sector by $70m.
• GAAP net loss of $12.3 million, with a dividend loss of $33.5 million.
• Declaration of a dividend of USD 0.25 per common stock for the second quarter of 2024.
• Plans to transition from asset management to investment with a focus on resolving subprime rated loans.

Company Outlook

• Ares Commercial aims to focus on loan origination and management of a portfolio of loans secured by commercial real estate.
• The company is cautiously optimistic about the outlook for the commercial real estate market.
• A concrete plan for resolving the North Carolina office loan default is expected within the next 60 to 90 days.

Bearish highlights

• The severity of losses in the office sector was surprisingly on the downside.

Positive highlights

• The resolution of underperforming loans added approx. $0.02 to the profit.
• Further settlement of non-performing loans is expected in the coming quarters.
• Stable interest rates have led to an increase in property transactions.

Miss winning

• The company has not disclosed specific figures regarding future loan decisions.

Q&A highlights

• Ares Commercial evaluates the balance between dividends and share buybacks based on market conditions.
• The company works actively with lenders to optimize its balance sheet.
• The increase in interest rates since the fourth quarter has affected asset values, but also created investment opportunities.

Ares Commercial Real Estate Corporation has taken proactive steps to improve its financial position by resolving non-performing loans and reducing its exposure to specific sectors. The company’s strategic focus on loan origination and servicing is aimed at generating regular income for shareholders. Despite a difficult quarter reflected in GAAP net loss and loss of retained earnings, Ares Commercial continues to work to strengthen its balance sheet and liquidity. The company’s approach to dividends and share buybacks will remain flexible in response to market conditions, ensuring the best returns for investors. With an expectation of further loan decisions on the horizon, Ares Commercial is positioning itself for potential growth in the commercial real estate markets.

InvestingPro Insights

Ares Commercial Real Estate Corporation (ACRE) is navigating a challenging market, as evidenced by its latest earnings report. InvestingPro’s data and advice provide additional context to the company’s financial health and future prospects.

InvestingPro data highlights include:

• A market cap of $368.75 million, reflecting the company’s current market valuation.

• A negative P/E ratio (adjusted) for the trailing 12 months from Q4 2023 of -13.41, indicating that the company has not been profitable.

• A significant dividend yield of 14.8% as of March 2024, demonstrating ACRE’s commitment to returning value to shareholders.

InvestingPro’s advice highlights key elements for investors to consider:

• ACRE has maintained its dividend payments for 13 consecutive years, demonstrating its ability to reward its shareholders even in difficult times.

• The company is not expected to be profitable this year, which is similar to the GAAP net loss reported last quarter.

For investors looking to learn more about Ares Commercial Real Estate Corporation, more InvestingPro advice is available at https://www.investing.com/pro/ACRE. These tips can provide additional information about the company’s performance and outlook, helping investors make more informed decisions. Use coupon code PRONEWS24 to get an additional 10% off a Pro and Pro+ annual or semi-annual subscription and access a total of 7 InvestingPro Tips for ACRE.

This article was generated and translated using artificial intelligence and reviewed by an editor. For more information, see our T&Cs.